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Racial Inequality Is Hollowing Out America’s Middle Class

As our country becomes more diverse, our racial wealth gap means it’s also becoming poorer.

By Dedrick Asante-Muhammad and Chuck Collins

America’s middle class is under assault.

Since 1983, national median wealth has declined by 20 percent, falling from $73,000 to $64,000 in 2013. And U.S. homeownership has been in a steady decline since 2005.

While we often hear about the struggles of the white working class, a driving force behind this trend is an accelerating decline in black and Latino household wealth.

Over those three decades, the wealth of median black and Latino households decreased by 75 percent and 50 percent, respectively, while median white household wealth actually rose a little. As of 2013, median whites had $116,800 in wealth — compared to just $2,000 for Latinos and $1,700 for blacks.

This wealth decline is a threat to the viability of the American middle class and the nation’s overall economic health. Families with more wealth can cover emergencies without going into debt and take advantage of economic opportunity, such as buying a home, saving for college, or starting a business.

We looked at the growing racial wealth gap in a new report for the Institute for Policy Studies and Prosperity Now.

We found that if these appalling trends continue, median black household wealth will hit zero by 2053, even while median white wealth continues to climb. Latino net worth will hit zero two decades later, according to our projections.

It’s in everyone’s interest to reverse these trends. Growing racial wealth inequality is bringing down median American middle class wealth, and with it shrinking the middle class — especially as Americans of color make up an increasing share of the U.S. population.

The causes of this racial wealth divide have little to do with individual behavior. Instead, they’re the result of a range of systemic factors and policies.

These include past discriminatory housing policies that continue to fuel an enormous racial divide in homeownership rates, as well as an “upside down” tax system that helps the wealthiest households get wealthier while providing the lowest income families with almost nothing.

The American middle class was created by government policy, investment, and the hard work of its citizenry. Today Americans are working as hard as ever, but government policy is failing to invest in a sustainable and growing middle class.

To do better, Congress must redirect subsidies to the already wealthy and invest in opportunities for poorer families to save and build wealth.

For example, people can currently write off part of their mortgage interest payments on their taxes. But this only benefits you if you already own a home — an opportunity long denied to millions of black and Latino families — and benefits you even more if you own an expensive home. It helps the already rich, at the expense of the poor.

Congress should reform that deduction and other tax expenditures to focus on those excluded from opportunity, not the already have-a-lots.

Other actions include protecting families from the wealth stripping practices common in many low-income communities, like “contract for deed” scams that can leave renters homeless even after they’ve fronted money for expensive repairs to their homes. That means strengthening institutions like the Consumer Financial Protection Bureau.

The nation has experienced 30 years of middle class decline. If we don’t want this to be a permanent trend, then government must respond with the boldness and ingenuity that expanded the middle class after World War Two — but this time with a racially inclusive frame to reflect our 21st century population.

Dedrick Asante-Muhammad directs the Racial Wealth Divide Project at Prosperity Now. Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. They’re co-authors of the new report, The Road to Zero Wealth.

Sometimes the Poor Make It Big. Usually They Stay Poor.

We’d be a better country if we didn’t rig the game against those whose only mistake was to be born to poor parents.

By Jill Richardson

We all want to live in a country where all it takes is hard work and some talent for anyone to succeed. We tell ourselves that we do. We even see examples of people who “came from nothing” and ended up rich and famous.

And it’s true that it sometimes happens. Sometimes a child born into poverty grows up to become the president of the United States, a multi-billionaire, or an Olympic gold medalist.

Most of the time, however, they don’t. And it’s not because they’re bad, lazy, stupid, or immoral. Often it’s because of our system itself.

Take our school system for a start. By funding schools with property taxes, we guarantee that the children from the richest neighborhoods go to the wealthiest schools.

If we lived in neighborhoods that were economically mixed with families of all incomes, this wouldn’t be a big deal. But we don’t. Instead we have areas of very wealthy people whose children attend wonderful schools, and areas of concentrated poverty where children attend failing schools.

And the kids in the good schools? Their parents can afford tutoring, extracurricular activities, summer camp, and SAT prep classes. It’s the kids whose parents can’t provide those extra learning opportunities who go to the worst schools.

Meanwhile, careers are sorted into those that require a college degree and those that don’t. Once upon a time, one could support a family on the wage of a manufacturing job. But America lost those jobs, and replaced them with poorly paid service jobs that often have no benefits.

For those without college degrees, getting ahead is difficult. But college is expensive. Even without the tuition costs, one has to keep a roof over their head and eat while attending school. Community colleges and online programs add flexibility for students who work full time while attending school, but it can still be difficult.

I don’t advocate a return to the days when men worked and women stayed home. But at least back then, families had an adult whose full time duties were to take care of the home and the children.

When women went to work, the expectations of the workplace didn’t change. Men with stay-at-home wives never needed maternity leave or flex time or places to pump breastmilk or time off to pick up a sick kid from day care.

But in families where both partners work, or in single parent families, how on earth are parents supposed to hold down a full time job and simultaneously be full-time homemakers?

Sociologist Arlie Hochschild examined this in her classic book The Second Shift, finding that the housework often still falls disproportionately to working women, often leaving them frazzled and exhausted. Sometimes the kids lose out, when neither parent has time to spend with them.

Wealthier families now pay for the work that women used to do for free: childcare, laundry, cooking, cleaning, and so on.

But whom do they pay? Less wealthy women, usually. And those women, after spending a day caring for someone else’s kids or doing someone else’s laundry, still have to figure out how to get their own housework done once they go home.

The end result is that most people who start out poor stay poor. And those who start out rich usually stay rich. (Recent studies show that Canada now has three times better social mobility than the U.S., suggesting the American dream moved north.)

Ours is a great system, if you’re rich. But we’d be a better country if we didn’t rig the game against those whose only mistake was to be born to poor parents.

OtherWords columnist Jill Richardson is the author of Recipe for America: Why Our Food System Is Broken and What We Can Do to Fix It. Distributed by OtherWords.org.

Can Anti-Racist Businesses Put Their Money Where Their Mouth Is?

Corporations rejecting racism is good, but it’s a low bar — especially when many still profit off it.

By Emily Norton

Donald Trump’s failure to condemn white supremacists after the violent neo-Nazi rally in Charlottesville several weeks back had an unexpected casualty: the president’s business advisory councils.

My partner works for a Fortune 500 company whose CEO sat on one those councils. Along with many other employees, my partner had been pressuring the CEO through an internal petition for some time.

Eventually, the dam broke: CEO after CEO decided they could no longer associate themselves with the White House after the incident, forcing Trump to dissolve two high-level panels.

I’m glad my partner’s efforts, along with bigger ones like a campaign to target “Corporate Backers of Hate,” rattled these major corporations’ top decision makers.

Corporate execs know that it’s bad for business to be affiliated with racists — and good for business to look like heroes. But while rejecting racism is good, it’s a low bar — especially when many still profit off it.

For example, Jamie Dimon, CEO of JP Morgan Chase, jumped into action after Charlottesville. He not only issued a statement, but also announced that JP Morgan Chase would donate $500,000 to the Southern Poverty Law Center, an organization that’s fought racism since the 1970s.

It was a smart business move. The last time JP Morgan was on the wrong side of racism, it cost them $55 million in settlements for charging black and brown people higher rates for their mortgages. Looking at that number, a $500,000 donation is a drop in the bucket.

The company can’t take back the discrimination lawsuits or its part in the housing crisis, which slashed black wealth in this country in half. That’s a huge percentage. Black families had already been denied centuries of wealth accumulation due to slavery and racist policies like redlining, and this crisis was a double whammy.

$500,000 also isn’t enough to make up for the bank’s financing of mass incarceration.

JP Morgan Chase lent hundreds of millions of dollars to Geo Group and CoreCivic, two major operators of private prisons and immigrant detention centers, despite investor concerns .

All that dirty money makes Dimon’s comments in support of DACA after Trump’s decision to repeal it also ring a little hollow.

DACA, or Deferred Action for Childhood Arrivals, is a program created by the Obama administration that protects some young undocumented immigrants from deportation.

It’s hard to believe that Dimon truly thinks that “when people come here to learn, work hard, and give back to their communities, we should allow them to stay in the United States” when his company supports corporations that profit from warehousing immigrants in detention.

White supremacy doesn’t just look like KKK hoods and swastikas — it can also wear a business suit on Wall Street. Of the top five Wall Street firms, the highest level decision makers are 86 percent white. That’s no coincidence.

Corporations have huge power they can use to fight structural racism. But it’s got to be more than just words.

JP Morgan and Goldman Sachs could publicly commit to pull contracts that contribute to mass incarceration. IBM could refuse contracts that contribute to violent immigration enforcement activities. Wells Fargo could halt its financing of the Dakota Access Pipeline on Native lands. At a minimum, that’s what the Corporate Backers of Hate campaign recommends.

And, by looking inward at their hiring policies, promotion policies, and pay scales, these businesses can begin building towards long term equality.

Don’t get me wrong, it is a good thing that they denounced hatred. I just hope they’ll put their money with their mouth is.

Emily Norton is the leadership development manager at the Institute for Policy Studies. Distributed by OtherWords.org.

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